Master the Metrics That Matter

Seat Expansion

Growth in the number of paid users within existing customer accounts, a key driver of expansion revenue.

Customer Health Score

A composite metric combining usage, engagement, and sentiment signals to predict customer renewal likelihood.

Freemium Conversion Rate

The percentage of free users who upgrade to paid plans, measuring the effectiveness of a freemium model.

Annual Contract Value (ACV)

The annualized value of a customer contract, normalizing multi-year deals for comparison and trend analysis.

Monthly Burn Rate

The amount of cash a company spends each month net of revenue, determining how long capital will last.

Efficiency Score

The ratio of net new ARR to sales and marketing spend, measuring how efficiently growth investment converts to revenue.

North Star Metric

The single metric that best captures the core value a product delivers to customers, aligning company focus.

Payback Period

The time required to recover customer acquisition cost from the gross margin a customer generates.

Discount Rate (SAFE/Note)

A percentage reduction on the next round's share price for SAFE or convertible note holders, rewarding early risk.

Valuation Cap

The maximum valuation at which a SAFE or convertible note converts to equity, protecting early investors from excessive dilution.

Exercise Price (Strike Price)

The price an option holder pays to convert options into shares, set at fair market value when granted.

Cliff (Vesting)

A waiting period before any equity vests, typically one year, protecting companies from early departures.

Preferred Stock

A class of stock with special rights including liquidation preference and anti-dilution protection, typically held by investors.

Common Stock

Basic ownership shares with voting rights but no special preferences, typically held by founders and employees.

Fully Diluted Shares

The total share count if all convertible securities converted to common stock, showing true ownership percentages.

Variance Analysis

Comparing actual results to budget and investigating the reasons for differences to improve future forecasting.

Zero-Based Budgeting (ZBB)

Building budgets from scratch each period, requiring justification for every expense rather than adjusting historical spending.

Scenario Planning

Creating multiple financial models with different assumptions to prepare for a range of possible futures.

Revenue Forecast

Projecting future revenue based on current trends, pipeline, churn, and expansion assumptions.

Cohort Analysis

Grouping users by signup date and tracking their behavior over time to reveal trends and product improvements.

Product Qualified Lead (PQL)

A user who demonstrates buying intent through product usage, predicting higher conversion likelihood than marketing leads.

Monthly Active Users (MAU)

The count of unique users who engaged with a product at least once in the past 30 days.

Session Duration

The average time users spend in your product per visit, measuring engagement depth.

Stickiness (DAU/MAU)

The ratio of daily to monthly active users, measuring how often users return and engage with your product.

Feature Adoption Rate

The percentage of users actively using a specific feature, measuring whether features deliver value.

Cost Per Acquisition (CPA)

The marketing cost to acquire one new customer, measuring acquisition efficiency by channel or campaign.

Gross Merchandise Value (GMV)

The total value of goods sold through a platform before fees, returns, or cancellations are deducted.

Return Rate

The percentage of orders returned by customers, measuring product satisfaction and description accuracy.

Sell-Through Rate

The percentage of inventory sold compared to what was received, measuring how quickly products move.

Inventory Turnover

How many times a company sells and replaces its inventory over a period, measuring inventory efficiency.

Revenue Recognition

The accounting principle determining when revenue is recorded, based on when it's earned rather than when cash is received.

Accounts Payable (AP)

Money a company owes to vendors and suppliers for goods or services received but not yet paid for.

Accounts Receivable (AR)

Money owed to a company by customers who have received goods or services but haven't yet paid.

Balance Sheet

A financial snapshot showing what a company owns (assets), owes (liabilities), and the residual value to shareholders (equity).

Income Statement (P&L)

A financial statement showing revenue, expenses, and profit over a period, revealing whether the business made or lost money.

Logo Churn vs Revenue Churn

Logo churn counts customers lost; revenue churn counts dollars lost. They reveal different aspects of retention health.

Lead Velocity Rate (LVR)

The month-over-month percentage growth in qualified leads, serving as a leading indicator of future revenue.

Sales Cycle Length

The average time from first prospect contact to deal close, measuring how long the sales process takes.

Win Rate

The percentage of sales opportunities that convert to closed won deals, measuring sales effectiveness.

Pipeline Coverage

The ratio of total sales pipeline value to revenue target, indicating whether there are enough opportunities to hit quota.

Bridge Round

Short-term financing to extend runway until a larger funding round closes, typically from existing investors.

Down Round

A funding round where the company raises money at a lower valuation than its previous round.

Term Sheet

A non-binding document outlining the key terms of a proposed investment before final legal documents are drafted.

Anti-Dilution

Protection that adjusts an investor's share price if the company later raises money at a lower valuation.

Liquidation Preference

The right of preferred shareholders to receive their investment back before common shareholders in a sale or liquidation.

Hype Ratio

The ratio of company valuation to annual revenue, showing how much valuation is based on future expectations versus current performance.

The analysis of revenue and costs at the individual customer or transaction level, determining whether each customer is profitable.

Capitalization Table

A document showing company ownership, including all shareholders, share counts, ownership percentages, and security terms.

Gross Burn vs Net Burn

Gross burn is total monthly spending; net burn is spending minus revenue, showing actual monthly cash consumption.

Contraction Revenue

Revenue lost when existing customers downgrade their plans or reduce usage, distinct from churn where customers leave entirely.

Working Capital

The difference between current assets and current liabilities, measuring ability to fund daily operations and meet short-term obligations.

Cash Flow

The movement of money into and out of a business, showing actual liquidity rather than accounting profit.

Repeat Purchase Rate

The percentage of customers who make more than one purchase, indicating customer satisfaction and loyalty.

DAU/MAU Ratio

The ratio of daily active users to monthly active users, measuring how frequently users engage with a product.

Revenue Run Rate

An annualized projection of current revenue, calculated by multiplying recent monthly or quarterly revenue by 12 or 4 respectively.

Pro Rata Rights

The right for existing investors to participate in future funding rounds to maintain their ownership percentage.

Vesting Schedule

The timeline over which equity ownership is earned, typically 4 years with a 1-year cliff before any shares vest.

Option Pool

A percentage of company equity reserved for future employee stock option grants, typically 10-20% of fully diluted shares.

Operating Margin

The percentage of revenue remaining after all operating costs, showing how efficiently a business converts revenue to operating profit.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of operational profitability excluding financing and accounting effects.

Customer Retention Rate

The percentage of customers who continue doing business with you over a specific period, measuring loyalty and satisfaction.

Cart Abandonment Rate

The percentage of online shoppers who add items to their cart but leave without completing the purchase.

Conversion Rate

The percentage of visitors who complete a desired action, such as making a purchase or signing up for a service.

AOV (Average Order Value)

The average dollar amount spent per order, calculated by dividing total revenue by total number of orders.

ROAS (Return on Ad Spend)

The revenue generated for every dollar spent on advertising, measuring the efficiency of paid marketing campaigns.

Convertible Note

A debt instrument that converts to equity in a future funding round, featuring interest accrual and a maturity date.

SAFE (Simple Agreement for Future Equity)

An investment agreement that converts to equity in a future funding round, featuring a valuation cap and/or discount without debt terms.

Dilution

The reduction in ownership percentage when new shares are issued, occurring during funding rounds and equity grants.

Post-Money Valuation

The value of a company immediately after receiving new investment, calculated as pre-money valuation plus investment amount.

Pre-Money Valuation

The value of a company before receiving new investment, used to calculate how much equity investors receive for their capital.

Break-Even Point

The point where total revenue equals total costs, meaning the business is neither profitable nor losing money.

Burn Multiple

A capital efficiency metric showing how much cash is burned to generate each dollar of new annual recurring revenue.

COGS (Cost of Goods Sold)

The direct costs of producing and delivering your product or service, subtracted from revenue to calculate gross profit.

Contribution Margin

The amount each sale contributes toward fixed costs and profit after subtracting variable costs directly tied to that sale.

Gross Margin

The percentage of revenue remaining after subtracting direct costs of delivering the product, before operating expenses.

NPS (Net Promoter Score)

A customer loyalty metric measuring willingness to recommend, calculated as the percentage of promoters minus detractors.

Time to Value (TTV)

The duration between a user signing up and experiencing meaningful value from the product for the first time.

Activation Rate

The percentage of new users who complete a key action indicating they've experienced the product's core value.

Net Dollar Retention (NDR)

The percentage of recurring revenue retained from existing customers over a year, including expansion and accounting for churn.

Rule of 40

A benchmark stating that a SaaS company's growth rate plus profit margin should equal or exceed 40% to be considered healthy.

Magic Number

A sales efficiency metric measuring how much new ARR is generated for each dollar spent on sales and marketing.

Quick Ratio (SaaS)

A growth efficiency metric comparing revenue added (new + expansion) to revenue lost (churn + contraction), showing net growth quality.

LTV:CAC Ratio

The ratio comparing customer lifetime value to acquisition cost, indicating whether your unit economics support sustainable growth.

CAC Payback Period

The number of months required to recover the cost of acquiring a customer through their subscription payments.

Churn Rate

The percentage of customers or revenue lost over a specific period, measuring how quickly you're losing business.

Net New ARR

The change in Annual Recurring Revenue over a period, accounting for new customers, expansion, contraction, and churn.

Deferred Revenue

Money received from customers for services not yet delivered, recorded as a liability until the service is provided and revenue can be recognized.

Billings

The amount invoiced to customers in a period, representing cash that will be collected regardless of revenue recognition timing.

Bookings

The total value of new contracts signed in a period, representing committed future revenue regardless of when it will be recognized.

TCV (Total Contract Value)

The total revenue value of a customer contract over its full term, including all recurring and one-time fees.

Expansion Revenue

Additional revenue generated from existing customers through upsells, cross-sells, and increased usage beyond their original purchase.

ACV (Annual Contract Value)

The average annualized revenue per customer contract, normalizing multi-year deals to show yearly value.

ARPU (Average Revenue Per User)

The average monthly or annual revenue generated per active user or account, calculated by dividing total revenue by total users.

GRR (Gross Revenue Retention)

The percentage of recurring revenue retained from existing customers, excluding expansion revenue and only accounting for churn and contraction.

NRR (Net Revenue Retention)

The percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn.

Runway

The amount of time a company can continue operating at its current burn rate before running out of cash.

LTV (Lifetime Value)

The total revenue a business expects to earn from a customer over the entire duration of their relationship.

CAC (Customer Acquisition Cost)

The total cost of acquiring a new customer, including all marketing and sales expenses divided by the number of new customers acquired.

Burn Rate

The rate at which a company spends its cash reserves, typically measured as net cash spent per month.